When can EB-5 funds be used during a project?

We have a comprehensive health care project including a nursing home, an adult daycare center, and an urgent care clinic etc. in Philadelphia PA requires investment of 25 million. We would like to raise that funds through EB-5 investment program and would like to find right people to help us setup the project and walk through the process. We have a property in mind, a closed hospital in city of Philadelphia that has been vacant for 16 years. Do we have to buy the property first to initiate the program vs. Can we setup EB-5 program first and use the EB-5 investment to buy the property? The property asks for 7 million and renovation cost estimated at 13 million.

Answers

You are able to purchase the property with EB-5 funds. There is no requirement that the property or project must be secured. You may also bridge the funds and satisfy the debt with EB-5 funds. Note, the purchase of property in itself does not create jobs. You should consult with an EB-5 attorney and economist to determine if there are enough jobs created by the project to satisfy the EB-5 regulations.

There is more than one way to structure the purchase you describe using EB-5 money. You could file for a Regional Center designation before purchasing the land and your application could outline the project listed below, as a hypothetical one. In this scenario your business plan would not have to be as detailed as if you were applying for a project or I-526 approval. Under this option you could also potentially sign a purchase agreement that is contingent upon you receiving approval as an EB-5 project. Another option would be to purchase the property first, using a short-term bridge loan specifically drafted with the intention for the loan to be replaced with EB-5 funding. Then, after receiving EB-5 approval, you could use EB-5 funds to pay off the bridge loan. It is important to remember, however, that real estate acquisition is not generally recognized as a job-creating activity in and of itself, so while the money can be used to purchase the land it cannot be used as an input into an economic impact model to calculate indirect job creation. Of course this assumes that the project itself qualifies under the EB-5 program job creation requirements. Our firm performs project feasibility reviews as the first step to working with an EB-5 client. During the project review we will be able to identify issues that could prevent you from using EB-5 funds. Our immigration and securities attorneys will also advise you as to the best way to structure the project from a business and EB-5 stand point.

EB-5 funds may be used to purchase property, before taking any action, you should discuss the plan and strategy with the appropriate EB-5 team that would include an EB-5 economist and immigration attorney to determine how much money could be raised based on job creation projections.

This is indeed an exciting project. Under the EB-5 program we can have you set up and then purchase the property, there is no requirement that you have the property or project secured, we can file an exemplar. Another option is that you bridge it and pay off the bridge with the EB-5 funds. We would be happy to assist you and talk to you about the process.

Philip H Teplen

Immigration Attorney

Answered onJune 25, 2013

Yes, the project needs to be designed around the EB-5 with a proper prospectus. I suggest you call us to best discuss how this is developed.

Taher Kameli

Immigration Attorney

Answered onJune 25, 2013

Before you start spending money on the business plan, ask yourself: Do I have the EB-5 investors available? Where do I get the EB-5 investors? Who will assist me? It is not that easy to raise EB-5 money.

You have to buy the property first to initiate the EB-5 program; any estimated capital towards renovation, remodeling or restructuring and operation of the business project can be used for creation of direct jobs, if the project is not regional center affiliated.

EB-5 funds can certainly be used to purchase property, however, this expense line item cannot be used to count jobs. Therefore, of the total $25 million projected cost, at least $7 million cannot be used for the job count. Depending on what the remaining $18 million will be used for ($13 million for renovation and $5 million for other associated costs), these expenditures could be counted towards job creation. We would have to see the complete breakdown before we can best advise you on what can and cannot be counted towards job creation. Nevertheless, we are local in Philadelphia and would be happy to offer you a free consult to further discuss this project.

Generally speaking, the business plan of the investment business can be either to purchase the property and begin work (perhaps by obtaining bridge financing that will be replaced by the EB-5 investment), or for the purchase to be contingent on the EB-5 approval. There will be numerous business factors that will likely be more important for that choice than the EB-5 regulatory process. We have worked with numerous developers on similar projects, however, and would be happy to speak with you about the best way to structure such a project.

Yes the funds can be used during the project and for the project in accordance with your USCIS approved business plan. However, it sounds like you want be a regional center and seek foreign investors interested in getting their green cards. You should talk with an Immigration Attorney about the specifics of your plan and the attorney can walk you through the process for the options available and help file the paperwork. You do not necessarily have to buy the property first. However depending on which option you choose, a business formation, contracts committing the funds, and the business plan for the project will be required along with many other details to be considered. You should be talking to and retaining an Immigration Attorney if you are serious about moving forward.

It is possible to use EB-5 funds to purchase the property. I am an EB-5 professional located in Philadelphia, PA if you would like to discuss this further.

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